Chapter 11

Question 1

What does the trade receivables and trade payables account represent?

Answer 1

total balances as recorded in nominal ledger

Question 2

When might contra entries occur?

Answer 2

situation may arise where a customer is also a supplier

instead of owing each other money, it may be agreed there is a contra of the balances

• balances cancelled each other out

Question 3

What is the double entry for contra entries?

Answer 3

Dr
Payable account

Cr
Receivables account

Question 4

When might we see credit balances on receivable accounts?

Answer 4

customer has over paid

credit notes have been issued when goods have already been paid for

payment is received in advance of raising invoice

Question 5

What could it mean when there is credit balances on receivable accounts?

Answer 5

we owe customer money

Question 6

What is dishonoured cheques/receipts?

Answer 6

customer may give us a cheque but there is not enough money in their account

Question 7

What do we have to do with dishonoured cheques/receipts?

Answer 7

we need to reverse the receipt that was originally recorded

Question 8

What is the double entry for dishonoured cheques/receipts?

Answer 8

Dr
Receivable account

Cr
Cash

Question 9

What is a discount allowed/received?

Answer 9

they reduce the amount of receivable from customer and discounts reduce the amount payable to supplier

Question 10

What is supplier statement?

Answer 10

prepared from the point of view of the supplier

balances are shown as debit balance on the statement because they are receivables balance from the suppliers point of view

Question 11

What is reconciliation?

Answer 11

transaction included in the payables ledger for the supplier are agreed to those on the supplier statement

any difference is investigated